How to Avoid Capital Gains When Selling Inherited Real Estate

If you have inherited a home, you may be wondering how to avoid capital gains on inherited real estate when it comes time to sell. The goal is to keep more of the estate’s equity with your family while still following IRS rules and Oregon tax laws.

How to Avoid Capital Gains on Inherited Real Estate: Start With the Basics

Most inherited properties receive a “step-up in basis,” which resets the tax basis to the fair market value on the date of death. When a home is sold close to that stepped-up value, there may be little or no taxable gain. Understanding this rule is the first step in reducing or avoiding capital gains on an inherited house.

Document the Stepped-Up Value of the Property

Accurate documentation is one of the best tools for minimizing capital gains. An appraisal or detailed market analysis done near the date of death helps establish the property’s value for tax purposes. Good records also make it easier for your CPA to show that any gain is small—or in some cases, that there is no gain at all.

For a deeper look at how stepped-up basis and taxable gains work, see our guide:
Capital Gains Tax on Inherited Property in Oregon

Consider Repairs, Holding Period, and Sale Timing

Large renovations, long holding periods, or a rapidly rising market can all increase the taxable gain on an inherited home. Before investing heavily in upgrades, talk with a tax professional about how those improvements may affect your basis. In some situations, selling sooner or focusing on essential repairs only may reduce overall capital gains exposure.

Work With Qualified Tax and Legal Professionals

A CPA or tax adviser can review your records, estimate any potential gain, and help you choose the best strategy for your situation. They may also identify exemptions or deductions you were not aware of. For general background, you can review IRS guidance here:
IRS Topic No. 409 – Capital Gains and Losses

Help With the Real-Estate Side of an Inherited Home

This page is for general education only and is not legal or tax advice. Always consult a licensed professional for advice specific to your estate and tax situation.

How to Avoid Capital Gains on Inherited Real Estate

Learning how to avoid capital gains on inherited real estate starts with understanding the stepped-up basis, keeping accurate records, and planning the timing of your sale. By documenting the property’s value at the date of death and reviewing potential improvements or market changes with a tax professional, many heirs are able to reduce or even eliminate taxable gains. These steps help protect the estate’s equity and support a smoother sale process.

If you are deciding whether to sell, prepare, or keep an inherited house, this resource may also help:
Selling an Inherited House in Oregon